the wealth of nations by adam smith preview

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ELECBOOK CLASSICS

The Wealthof Nations

Adam Smith

ISBN 1 84327 040 4

The Electric Book Company 2001The Electric Book Company Ltd

20 Cambridge Drive, London SE12 8AJ, UK www.elecbook.com


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An InquiryInto the Nature

and Causes of theWealth of Nations

Adam Smith


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The Wealth of Nations: Book 1

Adam Smith ElecBook Classics

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Contents

Click on page number to go to ChapterIntroduction and Plan of the Work ....................................................12

Book One: Of The Causes Of Improvement In TheProductive Powers Of Labour, And Of The OrderAccording To Which Its Produce Is Naturally

Distributed Among The Different Ranks Of The People ...............16Chapter 1. Of the Division of Labour ................................................17

Chapter II. Of the Principle which gives occasion tothe Division of Labour..........................................................................29

Chapter III. That the Division of Labour is limited bythe Extent of the Market......................................................................35

Chapter IV. Of the Origin and Use of Money...................................41

Chapter V. Of the Real and Nominal Price of Commodities, or their Price in Labour, and their Pricein Money.................................................................................................50

Chapter VI. Of the Component Parts of the Price of Commodities..........................................................................................73

Chapter VII. Of the Natural and Market Price of Commodities..........................................................................................83

Chapter VIII. Of the Wages of Labour ............................................96

Chapter IX. Of the Profits of Stock ................................................127

Chapter X. Of Wages and Profit in the different

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Employments of Labour and Stock .................................................142

PART 1.......................................................................................................... 143

Inequalities arising from the Nature of the Employments

themselves................................................................................................. 143

PART 2.......................................................................................................... 169

Inequalities by the Policy of Europe........................................................... 169

Chapter XI. Of the Rent of Land .....................................................203

PART 1.......................................................................................................... 206

Of the Produce of Land which always affords Rent .................................... 206

PART 2.......................................................................................................... 227

Of the Produce of Land which sometimes does, and sometimes

does not, afford Rent ................................................................................. 227

PART 3.......................................................................................................... 245

Of the Variations in the Proportion between the respective

Values of that Sort of Produce which always affords Rent, and of

that which sometimes does and sometimes does not afford Rent ................. 245

Digression Concerning The Variations In The Value Of Silver

During The Course Of The Four Last Centuries ..................................... 248

First Period .......................................................................................... 248

Second Period ...................................................................................... 267

Third Period ........................................................................................ 269

Variations In The Proportion Between The Respective Values

Of Gold And Silver ............................................................................... 292

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Grounds Of The Suspicion That The Value Of Silver Still

Continues To Decrease.......................................................................... 299

Different Effects Of The Progress Of Improvement UponThree Different Sorts Of Rude Produce.................................................. 301

First Sort .............................................................................................. 301

Second Sort .......................................................................................... 304

Third Sort ............................................................................................ 317

Conclusion Of The Digression Concerning The Variations In

The Value Of Silver .............................................................................. 330

Effects Of The Progress Of Improvement Upon The Real

Price Of Manufactures........................................................................... 337

Conclusion Of The Chapter ................................................................... 344

Book Two: Of the Nature, Accumulation, andEmployment of Stock........................................................................359

Chapter I. Of the Division of Stock..................................................363

Chapter II. Of Money Considered as a ParticularBranch of the General Stock of the Society, or of theExpense of Maintaining the National Capital ................................374

Chapter III.Of the Accumulation of Capital, or of

Productive and Unproductive Labour ............................................438

Chapter IV. Of Stock Lent at Interest.............................................465

Chapter V. Of the Different Employment of Capitals...................477

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Book Three: Of the Different Progress of Opulence inDifferent Nations ................................................................................499

Chapter I. Of the Natural Progress of Opulence...........................500Chapter II. Of the Discouragement of Agriculture inthe ancient State of Europe after the Fall of the RomanEmpire..................................................................................................507

Chapter III. Of the Rise and Progress of Cities andTowns after the Fall of the Roman Empire ....................................523

Chapter IV. How the Commerce of the TownsContributed to the Improvement of the Country.......................... 538

Book Four: Of Systems of Political Economy................................556

Introduction.........................................................................................557

Chapter I. Of the Principle of the Commercial, orMercantile System..............................................................................558

Chapter II. Of Restraints upon the Importation fromForeign Countries of such Goods as can be produced atHome.....................................................................................................589

Chapter III. Of the extraordinary Restraints upon theImportation of Goods of almost all kinds from those

Countries with which the Balance is supposed to bedisadvantageous..................................................................................617

PART 1.......................................................................................................... 617

Of the Unreasonableness of those Restraints even upon the

Principles of the Commercial System......................................................... 617



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Digression Concerning Banks Of Deposit, Particularly

Concerning That Of Amsterdam ............................................................ 625

PART 2.......................................................................................................... 639

Of the Unreasonableness of those extraordinary Restraints upon

other Principles.......................................................................................... 639

Chapter IV. Of Drawbacks................................................................654

Chapter V. Of Bounties ......................................................................662

DIGRESSION CONCERNING THE CORN TRADE AND

CORN LAWS ....................................................................................... 686

Chapter VI. Of Treaties of Commerce ............................................715

Chapter VII. Of Colonies...................................................................732

PART 1.......................................................................................................... 732

Of the Motives for establishing new Colonies ............................................ 732

PART 2.......................................................................................................... 744

Causes of Prosperity of New Colonies........................................................ 744

PART 3.......................................................................................................... 780

Of the Advantages which Europe has derived from the Discovery

of America, and from that of a Passage to the East Indies by the

Cape of Good Hope ................................................................................... 780

Chapter VIII. Conclusion of the Mercantile System....................852

Chapter IX. Of the Agricultural Systems, or of thoseSystems of Political Economy which represent theProduce of Land as either the sole or the principalSource of the Revenue and Wealth every Country........................880



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Appendix ..............................................................................................917

Book Five: Of the Revenue of the Sovereign orCommonwealth ...................................................................................921

Chapter I. Of the Expenses of the Sovereign orCommonwealth ...................................................................................922

PART 1.......................................................................................................... 922

Of the Expense of Defence......................................................................... 922

PART 2.......................................................................................................... 946

Of the Expense of Justice........................................................................... 946

PART 3.......................................................................................................... 963

Of the Expense of Public Works and Public Institutions ............................. 963

ARTICLE 1.................................................................................................... 964

Of the Public Works and Institutions for facilitating the

Commerce of the Society And, first, of those which are

necessary for facilitating Commerce in general. ......................................... 964

Of the Public Works and Institutions which are necessary for

facilitating particular Branches of Commerce............................................. 976

ARTICLE II .................................................................................................. 1013

Of the Expense of the Institutions for the Education of Youth....................1013

ARTICLE III .................................................................................................1049

Of the Expense of the Institutions for the Instruction of People of

all Ages....................................................................................................1049



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PART 4.........................................................................................................1088

Of the Expense of Supporting the Dignity of the Sovereign .......................1088

CONCLUSION....................................................................................1088

Chapter II. Of the Sources of the General or PublicRevenue of the Society.....................................................................1091

PART 1.........................................................................................................1091

Of the Funds or Sources of Revenue which may peculiarly

belong to the Sovereign or Commonwealth ...............................................1091

PART 2.........................................................................................................1103

Of Taxes ..................................................................................................1103

ARTICLE I ...................................................................................................1107

Taxes upon Rent. Taxes upon the Rent of Land.........................................1107

Taxes which are proportioned, not to the Rent, but to theProduce of Land ...................................................................................1119

Taxes upon the Rent of Houses .............................................................1124

ARTICLE II ..................................................................................................1135

Taxes on Profit, or upon the Revenue arising from Stock...........................1135

Taxes upon as Profit of particular Employments ...................................1142

Appendix to ARTICLES I and II. ...................................................................1151

Taxes upon the Capital Value of Land, Houses, and Stock.........................1151

ARTICLE III .................................................................................................1159

Taxes upon the Wages of Labour ..............................................................1159



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ARTICLE IV.................................................................................................1164

Taxes which, it is intended, should fall indifferently upon every

different Species of Revenue.....................................................................1164Capitation Taxes ..................................................................................1164

Taxes upon Consumable Commodities ..................................................1167

Chapter III. Of Public Debts ..........................................................1222



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Introduction and Plan of the Work

he annual labour of every nation is the fund whichoriginally supplies it with all the necessaries andconveniences of life which it annually consumes, and

which consist always either in the immediate produce of thatlabour, or in what is purchased with that produce from othernations.

According therefore as this produce, or what is purchased withit, bears a greater or smaller proportion to the number of thosewho are to consume it, the nation will be better or worse suppliedwith all the necessaries and conveniences for which it hasoccasion.

But this proportion must in every nation be regulated by two

different circumstances; first, by the skill, dexterity, and judgmentwith which its labour is generally applied; and, secondly, by theproportion between the number of those who are employed inuseful labour, and that of those who are not so employed.Whatever be the soil, climate, or extent of territory of anyparticular nation, the abundance or scantiness of its annual supplymust, in that particular situation, depend upon those two

circumstances.The abundance or scantiness of this supply, too, seems to

depend more upon the former of those two circumstances thanupon the latter. Among the savage nations of hunters and fishers,every individual who is able to work, is more or less employed inuseful labour, and endeavours to provide, as well as he can, the

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necessaries and conveniences of life, for himself, or such of hisfamily or tribe as are either too old, or too young, or too infirm togo a hunting and fishing. Such nations, however, are so miserablypoor that, from mere want, they are frequently reduced, or, atleast, think themselves reduced, to the necessity sometimes of directly destroying, and sometimes of abandoning their infants,their old people, and those afflicted with lingering diseases, toperish with hunger, or to be devoured by wild beasts. Amongcivilised and thriving nations, on the contrary, though a great

number of people do not labour at all, many of whom consume theproduce of ten times, frequently of a hundred times more labourthan the greater part of those who work; yet the produce of thewhole labour of the society is so great that all are often abundantlysupplied, and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of thenecessaries and conveniences of life than it is possible for anysavage to acquire.

The causes of this improvement, in the productive powers of labour, and the order, according to which its produce is naturallydistributed among the different ranks and conditions of men in thesociety, make the subject of the first book of this Inquiry.

Whatever be the actual state of the skill, dexterity, and

judgment with which labour is applied in any nation, theabundance or scantiness of its annual supply must depend, duringthe continuance of that state, upon the proportion between thenumber of those who are annually employed in useful labour, andthat of those who are not so employed. The number of useful andproductive labourers, it will hereafter appear, is everywhere inproportion to the quantity of capital stock which is employed in



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setting them to work, and to the particular way in which it is soemployed. The second book, therefore, treats of the nature of capital stock, of the manner in which it is gradually accumulated,and of the different quantities of labour which it puts into motion,according to the different ways in which it is employed.

Nations tolerably well advanced as to skill, dexterity, and judgment, in the application of labour, have followed verydifferent plans in the general conduct or direction of it; thoseplans have not all been equally favourable to the greatness of its

produce. The policy of some nations has given extraordinaryencouragement to the industry of the country; that of others to theindustry of towns. Scarce any nation has dealt equally andimpartially with every sort of industry. Since the downfall of theRoman empire, the policy of Europe has been more favourable toarts, manufactures, and commerce, the industry of towns, than toagriculture, the industry of the country. The circumstances whichseem to have introduced and established this policy are explainedin the third book.

Though those different plans were, perhaps, first introduced bythe private interests and prejudices of particular orders of men,without any regard to, or foresight of, their consequences upon thegeneral welfare of the society; yet they have given occasion to very

different theories of political economy; of which some magnify theimportance of that industry which is carried on in towns, others of that which is carried on in the country. Those theories have had aconsiderable influence, not only upon the opinions of men of learning, but upon the public conduct of princes and sovereignstates. I have endeavoured, in the fourth book, to explain, as fullyand distinctly as I can, those different theories, and the principal



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effects which they have produced in different ages and nations.To explain in what has consisted the revenue of the great body

of the people, or what has been the nature of those funds which, indifferent ages and nations, have supplied their annualconsumption, is the object of these four first books. The fifth andlast book treats of the revenue of the sovereign, or commonwealth.In this book I have endeavoured to show, first, what are thenecessary expenses of the sovereign, or commonwealth; which of those expenses ought to be defrayed by the general contribution of

the whole society; and which of them by that of some particularpart only, or of some particular members of it: secondly, what arethe different methods in which the whole society may be made tocontribute towards defraying the expenses incumbent on thewhole society, and what are the principal advantages andinconveniences of each of those methods: and, thirdly and lastly,what are the reasons and causes which have induced almost allmodern governments to mortgage some part of this revenue, or tocontract debts, and what have been the effects of those debts uponthe real wealth, the annual produce of the land and labour of thesociety.



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Book One

OF THE CAUSES OF IMPROVEMENT IN THEPRODUCTIVE POWERS OF LABOUR, AND OFTHE ORDER ACCORDING TO WHICH ITSPRODUCE IS NATURALLY DISTRIBUTEDAMONG THE DIFFERENT RANKS OF THE

PEOPLE



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Chapter I

Of the Division of Labour

he greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and

judgment with which it is anywhere directed, or applied,seem to have been the effects of the division of labour.

The effects of the division of labour, in the general business of society, will be more easily understood by considering in whatmanner it operates in some particular manufactures. It iscommonly supposed to be carried furthest in some very triflingones; not perhaps that it really is carried further in them than inothers of more importance: but in those trifling manufactureswhich are destined to supply the small wants of but a small

number of people, the whole number of workmen mustnecessarily be small; and those employed in every different branchof the work can often be collected into the same workhouse, andplaced at once under the view of the spectator. In those greatmanufactures, on the contrary, which are destined to supply thegreat wants of the great body of the people, every different branchof the work employs so great a number of workmen that it is

impossible to collect them all into the same workhouse. We canseldom see more, at one time, than those employed in one singlebranch. Though in such manufactures, therefore, the work mayreally be divided into a much greater number of parts than inthose of a more trifling nature, the division is not near so obvious,and has accordingly been much less observed.

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To take an example, therefore, from a very triflingmanufacture; but one in which the division of labour has beenvery often taken notice of, the trade of the pin-maker; a workmannot educated to this business (which the division of labour hasrendered a distinct trade), nor acquainted with the use of themachinery employed in it (to the invention of which the samedivision of labour has probably given occasion), could scarce,perhaps, with his utmost industry, make one pin in a day, andcertainly could not make twenty. But in the way in which this

business is now carried on, not only the whole work is a peculiartrade, but it is divided into a number of branches, of which thegreater part are likewise peculiar trades. One man draws out thewire, another straights it, a third cuts it, a fourth points it, a fifthgrinds it at the top for receiving the head; to make the headrequires two or three distinct operations; to put it on is a peculiarbusiness, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of makinga pin is, in this manner, divided into about eighteen distinctoperations, which, in some manufactories, are all performed bydistinct hands, though in others the same man will sometimesperform two or three of them. I have seen a small manufactory of this kind where ten men only were employed, and where some of

them consequently performed two or three distinct operations.But though they were very poor, and therefore but indifferentlyaccommodated with the necessary machinery, they could, whenthey exerted themselves, make among them about twelve poundsof pins in a day. There are in a pound upwards of four thousandpins of a middling size. Those ten persons, therefore, could makeamong them upwards of forty-eight thousand pins in a day. Each



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person, therefore, making a tenth part of forty-eight thousandpins, might be considered as making four thousand eight hundredpins in a day. But if they had all wrought separately andindependently, and without any of them having been educated tothis peculiar business, they certainly could not each of them havemade twenty, perhaps not one pin in a day; that is, certainly, notthe two hundred and fortieth, perhaps not the four thousand eighthundredth part of what they are at present capable of performing,in consequence of a proper division and combination of their

different operations.In every other art and manufacture, the effects of the division of

labour are similar to what they are in this very trifling one;though, in many of them, the labour can neither be so muchsubdivided, nor reduced to so great a simplicity of operation. Thedivision of labour, however, so far as it can be introduced,occasions, in every art, a proportionable increase of the productivepowers of labour. The separation of different trades andemployments from one another seems to have taken place inconsequence of this advantage. This separation, too, is generallycalled furthest in those countries which enjoy the highest degreeof industry and improvement; what is the work of one man in arude state of society being generally that of several in an improved

one. In every improved society, the farmer is generally nothing buta farmer; the manufacturer, nothing but a manufacturer. Thelabour, too, which is necessary to produce any one completemanufacture is almost always divided among a great number of hands. How many different trades are employed in each branch of the linen and woollen manufactures from the growers of the flaxand the wool, to the bleachers and smoothers of the linen, or to the



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dyers and dressers of the cloth! The nature of agriculture, indeed,does not admit of so many subdivisions of labour, nor of socomplete a separation of one business from another, asmanufactures. It is impossible to separate so entirely the businessof the grazier from that of the corn-farmer as the trade of thecarpenter is commonly separated from that of the smith. Thespinner is almost always a distinct person from the weaver; butthe ploughman, the harrower, the sower of the seed, and thereaper of the corn, are often the same.

The occasions for those different sorts of labour returning withthe different seasons of the year, it is impossible that one manshould be constantly employed in any one of them. Thisimpossibility of making so complete and entire a separation of allthe different branches of labour employed in agriculture isperhaps the reason why the improvement of the productivepowers of labour in this art does not always keep pace with theirimprovement in manufactures. The most opulent nations, indeed,generally excel all their neighbours in agriculture as well as inmanufactures; but they are commonly more distinguished by theirsuperiority in the latter than in the former. Their lands are ingeneral better cultivated, and having more labour and expensebestowed upon them, produce more in proportion to the extent

and natural fertility of the ground. But this superiority of produceis seldom much more than in proportion to the superiority of labour and expense. In agriculture, the labour of the rich countryis not always much more productive than that of the poor; or, atleast, it is never so much more productive as it commonly is inmanufactures. The corn of the rich country, therefore, will notalways, in the same degree of goodness, come cheaper to market



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The Wealth of Nations: Book 1 21

than that of the poor. The corn of Poland, in the same degree of goodness, is as cheap as that of France, notwithstanding thesuperior opulence and improvement of the latter country. Thecorn of France is, in the corn provinces, fully as good, and in mostyears nearly about the same price with the corn of England,though, in opulence and improvement, France is perhaps inferiorto England. The corn-lands of England, however, are bettercultivated than those of France, and the corn-lands of France aresaid to be much better cultivated than those of Poland. But though

the poor country, notwithstanding the inferiority of its cultivation,can, in some measure, rival the rich in the cheapness andgoodness of its corn, it can pretend to no such competition in itsmanufactures; at least if those manufactures suit the soil, climate,and situation of the rich country. The silks of France are betterand cheaper than those of England, because the silk manufacture,at least under the present high duties upon the importation of rawsilk, does not so well suit the climate of England as that of France.But the hardware and the coarse woollens of England are beyondall comparison superior to those of France, and much cheaper tooin the same degree of goodness. In Poland there are said to bescarce any manufactures of any kind, a few of those coarserhousehold manufactures excepted, without which no country can

well subsist.This great increase of the quantity of work which, inconsequence of the division of labour, the same number of peopleare capable of performing, is owing to three differentcircumstances; first, to the increase of dexterity in every particularworkman; secondly, to the saving of the time which is commonlylost in passing from one species of work to another; and lastly, to


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